Direct Tax Vivad Se Vishwas Scheme 2024: Resolve Tax Disputes Easily

The Direct Tax Vivad Se Vishwas Scheme, 2024 (DTVSV Scheme, 2024) is a government initiative aimed at resolving pending income tax disputes. The scheme was introduced through the Finance (No.2) Act, 2024 and officially commenced on 1st October 2024. The primary goal of the scheme is to reduce the backlog of income tax litigation, ensure timely revenue collection for the government, and provide taxpayers with peace of mind by saving them time and resources that would otherwise be spent on lengthy legal battles.

Key Points of the Scheme:

Eligible Cases

   - Appeals, writ petitions, or special leave petitions (SLPs) pending as of 22nd July 2024.

   - Cases where objections have been filed before the Dispute Resolution Panel (DRP) under Section 144C of the Income-tax Act, 1961, and no directions have been issued by the DRP as of 22nd July 2024.

   - Cases where the DRP has issued directions, but the assessment has not been completed by the Assessing Officer (AO) as of 22nd July 2024.

   - Applications for revision under Section 264 of the Income-tax Act, 1961, pending as of 22nd July 2024.

Non-Eligible Cases:

   - Cases involving tax arrears related to assessments made under Section 143(3)/144/147/153A/153C based on searches initiated under Section 132/132A.

   - Cases where prosecution has been instituted before the date of filing the declaration.

   - Cases involving undisclosed income or assets located outside India.

   - Cases related to assessments made based on information received under Section 90 or 90A of the Income-tax Act, 1961.

   - Cases where provisions of COFEPOSA Act, 1974, UAPA Act, 1967, NDPS Act, 1985, PBPT Act, 1988, PC Act, 1988, or PMLA, 2002 apply.

Rates of Payment:

   - New Appellant: 100% of disputed tax if declared by 31st December 2024, or 110% if declared after this date.

   - Old Appellant: 110% of disputed tax if declared by 31st December 2024, or 120% if declared after this date.

   - Disputed Interest/Penalty/Fee: 25% for new appellants and 30% for old appellants if declared by 31st December 2024, or 30% and 35% respectively if declared after this date.

   - Special Cases: If the appeal is filed by the income-tax authority, the amount payable is 50% of the specified rates.

Forms and Timelines:

   - Form-1: Declaration and undertaking by the taxpayer.

   - Form-2: Certificate issued by the Designated Authority.

   - Form-3: Intimation of payment by the taxpayer.

   - Form-4: Order for full and final settlement of tax arrears.

   - Timelines:

     - Declaration must be filed by 31st December 2024 to avail lower rates.

     - The Designated Authority will issue Form-2 within 15 days of receiving the declaration.

     - The taxpayer must pay the determined amount within 15 days of receiving Form-2 and intimate the payment details in Form-3.

     - The Designated Authority will then issue Form-4, confirming full and final settlement.

Search Assessments: - Assessments made under Section 153A or 153C based on searches initiated under Section 132/132A are not eligible.

   - Other assessments made under Section 143(3)/144/147 may be eligible unless they are based on searches initiated after 1st April 2021.

Rollback Years:  - If a taxpayer settles some years under the DTVSV Scheme, they can apply for Advance Pricing Agreement (APA) for the remaining years, provided the rollback period is less than four years.

Appeal Disposed Off: - If an appeal is disposed of before the taxpayer files a declaration under the scheme, the case is no longer eligible unless a new appeal is filed.

Settling Issues in Part: - The scheme does not allow partial settlement. If a case involves both qualifying and non-qualifying tax arrears, the entire dispute must be settled under the scheme.

Penalty Appeal: - A taxpayer cannot settle a penalty appeal while continuing to litigate the associated quantum appeal. Both must be settled together.

Protective and Substantive Additions: - If both substantive and protective additions are made, either can be settled under the scheme. Once settled, the AO will pass a rectification order to delete the other addition.

Other Direct Taxes: - The scheme only covers income tax disputes. Disputes related to wealth tax, security transaction tax, commodity transaction tax, and equalisation levy are not covered.

Interest Waiver Applications: - Cases where only interest waiver applications are pending are not covered under the scheme.

Enhancement Notice: - If an enhancement notice is issued by the JCIT(A)/CIT(A), the taxpayer can include the proposed enhanced income in the total assessed income and avail the scheme.

Refund Issues: - Taxpayers cannot use expected refunds to settle disputes under the scheme. Payment must be made directly, and any taxes paid under the scheme are non-refundable.

TDS/TCS Issues: - Disputes related to TDS/TCS are covered, but delays in depositing TDS/TCS are not. However, interest levied due to such delays can be settled under the scheme.

Consequential Relief:- If a taxpayer settles TDS liability, they can claim consequential relief under Section 40(a)(i)/(ia) of the Income-tax Act, 1961, in the year the tax was required to be deducted.

Registration under Section 12AA: - Appeals against denial of registration under Section 12AA are not eligible under the scheme.

Set-Aside Matters: - Cases where orders have been set aside to the AO are not considered pending appeals and are therefore not eligible.

Two Appeals for One Assessment Year: - If both the taxpayer and the tax department have filed appeals for the same assessment year, the taxpayer can choose to settle one or both appeals.

Writ on Section 148/148A Notice: - If a writ has been filed against a notice under Section 148/148A and no assessment order has been passed, the case is not eligible as the disputed tax is not ascertainable.

 Appeal Before HC/SC Yet to be Admitted: - Appeals pending for admission before the High Court or Supreme Court as of 22nd July 2024 are eligible.

Cross Objections and Miscellaneous Applications: - Cross objections filed and pending as of 22nd July 2024 are covered, but miscellaneous applications are not.

Assessment Order Stayed by HC/SC: - If an assessment order has been stayed by the High Court or Supreme Court, the case is not eligible as it does not count as a pending appeal.

Other Issues: - If multiple orders are passed for the same assessment year, the taxpayer can choose to settle one or both orders, but separate declarations must be filed for each order.

    - If a taxpayer has already received relief from the Supreme Court on an issue, that issue does not need to be settled under the scheme.

    - Interest and penalty will only be waived for the disputed issue, not for undisputed issues.

    - If a taxpayer fails to make the payment after filing a declaration, the declaration becomes null and void.

    - Immunity from prosecution under the scheme extends to directors or partners of the company/firm in respect of the settled dispute.

Conclusion

The Direct Tax Vivad Se Vishwas Scheme, 2024 offers a comprehensive framework for resolving pending tax disputes. Taxpayers should carefully evaluate their eligibility and the benefits of the scheme before opting to settle their disputes. The scheme provides a structured timeline and clear guidelines to ensure a smooth resolution process, ultimately benefiting both the government and the taxpayers.